Annuities

Every year in May, I get excited for the return of the Indianapolis 500. It’s called The Greatest Spectacle in Racing for a reason: every Memorial Day weekend, nearly 300,000 people pack themselves into a stadium around a 2.5-mile oval just west of Indianapolis. This race involves 33 cars on a track, driving at speeds exceeding 220 mph, and the flying start is one of the most exciting moments in racing. You can see team colors around the track – bright, vibrant, and distinct. The cars flash by in a blur, and yet have the same distinct color pattern.

Lasting between 3 and 5 hours, this particular race becomes more about endurance than speed. Engines fail. Accidents happen. Mistakes in the pit force a car off the track. Any number of issues can come up over 500 miles, so winning requires razor-sharp focus.

Isn’t that just like retirement planning?

There is so much trouble that can come along on your way to the finish line – healthcare costs, long term care events, inflation, tax bracket changes and uncertain life expectancies. Clients have to stay in the race in order to win it with some level of guarantee until they reach the finish line.

It’s not where you start retirement planning so much as how you finish it. In 102 races, there have only been 20 winners that have started from the fastest qualifying position. Don’t panic if your client doesn’t seem to have enough assets – just think differently about how to help them get to the end of the race. Keep them in a position to maintain momentum, maneuver smoothly in traffic and pull away from the pack.

Client’s retirement funds must have the power to grow – hopefully, free of taxes during the accumulation phase so that the account has more money to produce income. At the same time, the portfolio must have some level of risk mitigation, especially in the final 10-15 years of accumulation. There has to be a balance of protection and growth.

As the final 20 laps tick down, the tactics change. Drivers get more aggressive; crew managers position the car for the optimum level of fuel to make it faster, yet still get to the finish. The sequence of return risk is no different. However, there are better ways to mitigate the potential risks. Planners have to find a way to get maximum income for the longest period of time while protecting inflation risks and price fluctuations.

It’s a long race with many levers that have to be pulled in order to win– not just assets under management with a questionable withdrawal percentage. Having flexibility, consistency, and power ultimately wins the race.

Winning Strategy: Make sure your clients cross the finish line by keeping them in the race first and then focusing on strategies that keep them out of trouble.

About the AuthorMike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

Lately I’ve been listening, watching, and communicating with experts who specialize in hiring and managing millennials. It’s clear that this new generation of financial planner is operating with different metrics and definitions of success than the one that came before. To be clear, I’m not saying it’s wrong – it’s just different. I was blown away by the level of professionalism at the Financial Service Professionals Industry Issues Competition. Five universities competed this year, and it was clear that the new generation of advisors is as committed to the principles of integrity, preparedness and accountability as the generation that came before. One young person recently posted a video of her thoughts about the value of education versus experience. She made a great point: college teaches you how to find the answer, but experience gives you the deeper knowledge.

The same can be said for our industry, too – particularly as it applies to both generational differences and to technology. A mentor once told me, “The internet is a great place to get information, but it’s a terrible place to sell.”

While financial products are almost purely digital today, the web may not be the best place to educate and advise people on complex problems – including retirement. In the age of social media and soundbites, the internet isn’t known for being conducive to nuance. Still, it remains the easiest place to get information. How you use and filter that information marks the difference between success and failure in financial planning.

Clients depend on knowledge, not piles of data. Don’t just settle for an answer. You need to find the knowledge behind the answer that can be conveyed to the client. What technology can’t deliver – and you can – is expertise: the ability to use the information wisely, properly, confidently, and in the best interest of the client. That is what separates the financial professional from technology: human connectivity.

We tend to pacify our clients with information too often. They can find that information now, on their own. Instead of spreadsheets, statistics, fund returns and portfolio allocations, we can help them find the answers that make the most sense of the information. What they need is a person to guide them through the maze of data to formulate the best strategy for success. Think about concentrating on delivering value in the form of knowledge and expertise, not just information and data.

Winning Strategies: Your client can – and will – find a lot of information just as quickly and reliably as you can. As planners, we need to shift our focus towards using information to convey our knowledge and expertise rather than just providing data.

About the AuthorMike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

In normal circumstances, four days on a cruise ship sounds like a dream. But this wasn’t a normal cruise.

Part of professional development sometimes means continuing education, and that’s where I was – at sea, for a four-day conference, listening to talks about the financial industry and tax updates. Work is work, regardless of where you are, and I felt a need to stay connected to the office during my four days away. While signing up for internet service aboard the ship, I learned that the daily fee for basic, lowspeed internet was $15.95. I pay around $65 a month for Wi-Fi at home – that’s roughly $2.00 a day. And the coverage on board was spotty and slow at best.

Now I’m sure getting a Wi-Fi signal in the middle of the ocean is no small feat, but I have questions:

- Is paying 697% more money for less service really in my best interest?

- Who in the leisure industry is responsible for these outrageous pricing decisions?

- Why aren’t these people being held accountable?

As I thought about pricing, fairness and accountability, another question came to mind: Why does there seem to be a double standard regarding Best Interest rules directed toward the insurance industry in comparison to everyone else? Is paying $15.95 a day for internet more unreasonable than a 3% commission for lifetime income that will last 20 or more years?

The noise around Best Interest continues to increase in 2019. The SEC has an interest in providing Best Interest Standards, which seem to be the most efficient way of providing uniformity and consistency. Several states have recently begun formulating their own definitions of Best Interest Standard as well – some include a private right-of-action similar to the DOL’s version of Best Interest. But I’ve recently had to question why the financial services industry is being discriminated against and held to a certain standard when other industry standards are more lenient.

My wife and I signed a purchase agreement for a townhouse that was being built. The outer shell was already complete when we closed on the property, but we had to build out the interior. Six months after the plans were approved, we only have one pipe installed for the plumbing. Where is the accountability to a professional association for the construction industry? Why is someone allowed to charge interest and hold thousands of dollars with no benefit to the client? This would never hold up as Best Interest.

Our industry generally has the highest level of ethics of any consumer-facing enterprise. Politicians aren’t shy about voicing disgust when those ethics are violated, and yet the country turns a blind eye to abusive pricing strategies of other industries and shows a complete disregard to consumer expectations. It’s time to stop and look at all consumer interactions, not just financial transactions. Be involved with local advocacy groups. Be vocal towards your congressional representatives in the Best Interest conversation.

Winning Strategies: Be an advocate for Best Interest for everyone and every industry. Support what’s best for the consumer but every industry needs to be held accountable.

About the AuthorMike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

In my talks around the country, I frequently speak on retirement income and trying to make the income stream more efficient. Often this means having to discuss taxation and overall income disbursement. There are a lot of major hurdles that today’s advisors will encounter while helping clients plan for retirement income.

Low Savings Rates: Comparatively, the United States savings rate is painfully low. With the exceptions of high inflationary periods or market corrections, our personal savings rates have been on a steady decline in the last four decades. The end result is the average baby boomer born in the 1960s only has $131,900 saved for retirement1.

Misuse of Social Security: Less than 5 percent of Americans choose to defer their Social Security benefits until they are 702. The benefits of the primary wage earner waiting until then typically outweigh taking income early. The spousal and inflation protection gained with this strategy relieves pressure from many portfolios.

Defined Benefit Plan Changes: Older generations used to look to guaranteed income as a staple in their retirement plans. Today, more accountability is placed in the employee’s hands, but they are given little information about how to convert those assets into income. The default distribution is usually a simple, systematic withdrawal plan that does not account for longevity.

Longevity: People are living longer than ever before. It’s more difficult to plan for an unknown ending as the date moves further away from us each year. Extended life expectancies mean we need to plan for more income – and income disbursements – when we need more care.

The end result is this: advisors are going to have to work out how to generate more income, for longer periods of time, with less assets than ever before.

This generation of advisors has more challenges to face than have been seen in the financial industry for the last twenty years. This means we have to think, act, and plan differently. Our world is changing, and we must adapt to the new world – or lose the client’s confidence.

Winning Strategy: Understand the new rules of retirement income planning. Think and act differently than you have previously in order to adapt to the new world of income planning.

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

The financial industry is experiencing the lowest level of trust it’s seen. Actually, we have been there for several years. Even after the scores rose somewhat in 2014, the industry is still facing a deep lack of trust – worse than any other industry. In a survey conducted by Edelman, participants in the top 25 percent of household income have spoken – our largest target market does not trust us.

So what do we do? We can’t ignore the stats anymore. We can’t keep shifting blame onto financial crises from a decade ago. In Free Throws for Financial Professionals, I talk about a few things for planners to keep in mind:

Integrity

During his tenure as coach for IU Basketball, Coach Knight won 902 games, three national championships, multiple conference titles, a National Invitational tournament, and an Olympic gold medal – and 98 percent of his players graduated. Coach didn’t just want good players – he knew basketball would be a temporary part of these kid’s lives, and they’d need a plan for afterwards.

What would our clients’ lives look like if we focused on them as much as Coach focused on the holistic outcome? Too often, we are looking to capture assets under management or make a sale. We need to get back to basics and focus on the outcome – getting the client to their goal of a sustainable income during retirement.

Self-Awareness

In the 1987 national championships, Daryl Thomas could have been made immortal: he could have made the winning shot. But he would have had to make a jump shot against good blockers to do it. As a freshman, he may have forced up a shot. But, with experience he knew what his strengths were. Instead, he did the smart thing. He passed to Keith Smart, who got the winning score.

As we witness the largest shift in the workforce in American history, we have to take stock of our own weaknesses and biases toward products that mitigate longevity. Or, we have to surround ourselves with other professionals who can view the income portfolio with a different set of eyes. Either way, we must increase our knowledge base of longevity-related risks as the population continues to age and needs income for longer periods of time.

Prepare to Win

“Everyone has a will to win; few have a will to prepare to win.” - Coach Knight

Coach took copious notes during each practice. Managers filmed every moment and took down stats regarding each specific offensive set we ran. We’d look at the numbers and ask “why?” It took looking at the film to see why we were having success against one defense versus another.

In our business, we must ask why more often. There’s a lot of talk about being a fiduciary and setting standards. We can meet those standards by asking simple questions focused on the client, then shift the current standards to focus on the client. Not practices. Not disclosures, fees or conflict of interest. The client. We must understand our clients as well as Coach understood his players – their strengths, their weaknesses and other team’s qualities.

If we don’t change, we’ll continue to be at the bottom. So how do we improve trust? It doesn’t come down to simple regulation. Instead, it’s about changing our behaviors toward clients and our techniques that demonstrate a total focus on the client. Think about how you can work with integrity, play to your strengths and maintain curiosity on how we improve the client’s situation. That will build trust faster than any regulation.

Winning Strategy: Build trust with a focus on the other person. Do what is best for them and our industry will gain respect.

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.